Power tariffs may rise by 15-17 paise per unit

The government on Friday decided to allow power producers to pass on the higher cost of imported coal to consumers, a move that would increase electricity tariff by a about 15 to 17 paise per unit across the nation.

"There will be small increase in power tariff... it will be very marginal increase on unit cost of power depending upon the cost of import of coal," finance minister P Chidambaram said while briefing media after the Cabinet Committee on Economic Affairs (CCEA) meeting.

He said while the government has already taken steps to increase production, certain other decisions would also be taken by the first week of July to open up more coal mines and to produce more coal.

"It is better to have power and pay a few paise more than not have power at all," he said.

The Cabinet has also approved the sale of 5% stake in the in the Tamil Nadu-based miner Neyveli Lignite (NLC), which is expected to garner about R466 crore to the exchequer. The department of disinvestment (DoD) had underlined to the CCEA that divesting stake was the only way to make the company compliant with the minimum public shareholding norm.

However, Tamil Nadu chief minister J Jayalalithaa last month had opposed disinvestment saying that there could be labour unrest in the company.

The government has also approved a proposal to help developers free up equity locked in completed road projects by allowing them to exit just three months after its completion to tide over the lull in highway sector.

The exiting developer will, however, have to pay a penalty equivalent to 1% of the total project cost to the National Highways Authority of India (NHAI), the central agency which builds highways.

The Cabinet, meanwhile, deferred a decision on the proposal to hike prices of natural gas by 60% as oil minister M Veerappa Moily is on an official tour. His ministry is pressing for an across-the-board increase in prices of gas. The proposal would, however, lead to a steep rise in electricity tariff, urea manufacturing cost as well as CNG rates.